PayPal Reports Sales Up 19%, CEO Calls It His 'Best Quarter Ever'

PayPal reported first quarter earnings for 2016 on Wednesday and continued to show growth in its core payments business.

Following a year in which it split from former parent company
eBay and closed a series of high-profile acquisitions, the San Jose, Calif.-based financial technology firm increased its payment volume and improved on its active customer base. That in turn led to financial results that exceeded Wall Street's expectations in what PayPal CEO Dan Schulman called his "best quarter ever" since he joined the company in Sept. 2014.

In a call with FORBES following the earnings release, Schulman said PayPal's performance could be attributed to the company's renewed focus on improving customer engagement. Earlier this year, the company redesigned and relaunched its PayPal app and also expanded the reach of One Touch, its mobile checkout service, which now has 21 million users.

"When you have 184 million active accounts, moving that customer engagement number even one point from quarter to quarter is significant," he said.

For the three months ending on March 31, PayPal reported adjusted net income of $452 million, or 37 cents per share. That compared to a net profit of $353 million, or 29 cents a share, in the same period last year, and came in higher than the average profit of 35 cents a share that was expected by 35 analysts polled by Yahoo.

The company reported net revenue of $2.54 billion, up 19% from sales of $2.14 billion in the first quarter of 2015. That figure was slightly higher than the average estimate from analysts, who anticipated net revenue to be $2.5 billion.

PayPal's key metric of total payment volume, or the value of payments completed through PayPal, came in at $81.06 billion for the first quarter, up 29% from the same period last year. Its active customer accounts, defined as an account that had completed a transaction on PayPal in the last 12 months, were up to 184 million, an increase of 11% from the first three months of 2015.

On his company's earnings call, CEO Dan Schulman reiterated PayPal's focus on mobile development and said it processed $21 billion in payment volume on phones and tablets, up 54% from the same period last year. Venmo, the company's popular peer-to-peer payments app, played a large part in the mobile expansion and recorded payment volume of $3.2 billion for the quarter.

Venmo's triple-digit growth is slowing, however. While the unit's payment volume was up 154% from the first three months of 2015, its rate of increase fell below the 174% increase seen in the fourth quarter of last year and the 213% increase for the whole of 2015.

"When something is small and growing it’s easy to grow, but look at the absolute volume numbers," Schulman said to FORBES. "In the quarter a year ago, we did $1.25 billion. This quarter we did $3.2 billion... even though the growth rate is a mere 154%."

PayPal may look to counter any kind of slowdown by continuing to open up a pilot program that allows Venmo users to pay for good and services within other apps. Launched in January with Munchery, a food delivery company, and Gametime, a mobile tickets vendor, the pilot now has 550,000 Venmo users said Schulman, adding that "early customer feedback has provided strong validation." He declined to say how many users were now on Venmo.

For the current quarter, the company said that it expects net revenue to grow anywhere from 12% to 14% and fall between $2.57 billion to $2.62 billion. The company also projected adjusted earnings per share to be between 34 cents to 36 cents.

Following the release of earnings, PayPal stock is up more than 2% in after-hours trading from Wednesday's closing share price of $40.01. The company's shares are up more than 10.5% since the start of the year.

I'm a San Francisco-based reporter covering the agitators in technology and e-commerce. I started at Forbes as a member of the wealth team, putting together the magazine's well-known World Billionaires and Forbes 400 lists. I've worked at a number of publications including T...